A contractor must ensure a supply chain is robust enough to handle any disruption. To do so, contractors must understand how material supply chains work and their impact.
Construction input prices continue to escalate and there’s no sign they’ll return to normal soon. To cope, many contractors are incorporating resilience into their supply chain strategies.
Supply Chain Management
A building material supply chain is a linear network that links manufacturers, distributors and logistics businesses with end consumers. Each link has a specific role to play, and each one must be managed carefully. The impact of a disruption in any of these steps can be felt throughout the entire network and cost intermediaries and customers alike significant time and money.
Construction material supplies can be affected by a wide range of factors. For instance, new trade barriers or rising import costs can push up prices for building materials and increase the lead time needed to secure delivery. Fortunately, the right tools can help mitigate these challenges.
For example, smart management platforms like Buildertrend can help builders and contractors secure premium products at discounted rates and collaborate more effectively with suppliers. Such platforms can also automate workflows and identify industry trends to streamline the supply chain.
In addition to promoting supplier collaboration, effective supply chain management also involves having processes in place to communicate potential issues and take immediate action. This ensures that everyone is on the same page and that all parties can address any problems as they arise. This helps to reduce rework and redundancy, which can be costly for both businesses and their customers.
Inventory Management
Having the right materials at hand ensures that construction workflows can proceed without interruption. However, a shortage of building materials can quickly make or break project timelines, creating delays that could cost the company time, money and customer satisfaction.
Material inventory management is the process of identifying and tracking all of your materials — from raw or finished goods in storage to those that are onsite and in use. It involves analyzing demand forecasts, sales data and construction supply chain management processes to understand where your materials are needed and when.
A good material inventory management plan also includes a backup plan for each of your main material suppliers to avoid supply disruptions. This means collaborating with engineers and architects during the design phase to prevent them from selecting materials that will be in short supply, ordering the material ASAP so you can lock in costs and delivery windows, and revisiting your procurement contracts to include incentive/damage clauses.
Having accurate inventory information also helps minimize the amount of storage space you need to keep materials in your warehouses, storage facilities and job sites. It also eliminates the need to reorder materials and reduces wasted material at a job site. It is also important to communicate with your suppliers and contractors to discuss supply issues in advance of a potential impact on the project schedule, so you can explore alternatives and work together to mitigate delays and costs.
Inventory Control
Whether you need to manage raw materials, components or partially finished assemblies, the accurate measurement and tracking of inventory is essential to effective construction workflow. This ensures that the right materials, tools and equipment are at hand when they’re needed for the next phase of a project without having to overstock warehouses, storage facilities or job sites.
When home builders use an expert supply chain management software solution, they can better coordinate procurement and delivery with material suppliers and dealers to minimize delays or overstocking. It’s important for these systems to incorporate a review process with each supplier to determine the quality of the materials, their costs and the timeliness of interaction and delivery.
A good inventory system should also provide an efficient means for transferring real market demand information to the supply chain, rather than simply relying on sales forecasts to inform inventory acquisition planning. This ensures that the right materials are delivered in the required quantity to match the production schedule. It also helps reduce operational costs, including those associated with the storage, handling and risk of damage to inventory. When a shortage hits, the ability to ramp up alternative materials is vital. This prevents the need to ration, which could create its own issues and even further limit availability of the original material. This flexibility can also be passed on to the customer, improving customer satisfaction.
Order Management
Managing the process of taking orders from customers and delivering materials to their construction site is critical for the success of any project. This is especially true for the last mile delivery stage – which is where the materials move from a transportation hub to their final destination. Streamlined processes that allow built professionals to handle this part of the logistics process more easily can make for better customer satisfaction and help companies save time and money.
A robust supply chain management process starts with demand forecasting, which involves predicting future material needs. This helps businesses avoid stocking out (which can lead to backorders and dissatisfied customers) or ending up with too much inventory (which increases holding costs). It also includes scheduling and sourcing, which is essential for maintaining timelines and reducing unnecessary costs.
Another component of construction supply chain management is quality control, which ensures that materials and equipment meet project standards. Ideally, this is accomplished through collaboration between engineers and architects during the design phase to select materials that will be available when it comes time for mobilization. It also requires communicating with suppliers to establish pricing and delivery expectations.
Despite the current labor shortage, the majority of construction business owners expect to have access to enough skilled workers in 2023. This is a positive sign for the industry, but will still require strong communication between subcontractors and builders to manage the effects of delays on the construction schedule.